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On the budget: The most disturbing aspect of Obama's budget thinking continues to be marginal income tax rates and the notion that equity is definable as merely the number of voters a tax manages to avoid and the degree to which it impacts a cohort least likely to support their author. "Only affects X percent of households" is not an adequate answer to a question that is really about ethical governance, nor is such a tax strategy very effective in terms of raising revenue and stimulating economic growth.

The two parties' different takes on the White House budget proposal off an important -- even moral -- contrast to the general Republican philosophy on taxation versus the classic "utilitarian" approach outlined by Obama in a State of the Union address. Republicans are certainly aware that restraining the highest marginal tax rates affects a relatively small number of voters; rather, it reflects their philosophy that tax rates should be progressive but not be punitive, and that high marginal rates are both unfair and counterproductive. They cannot be said to be "rewarding" their constituency through tax rates the way Democrats do because their voting constituency is much larger than those affected by the high rates. By contrast, Obama persistently boasts about how much larger are the number of beneficiaries of his tax largesse than the number screwed by it. Accordingly, Republicans are acting on principle while Obama is merely buying votes in a fashion little different from a third world autocrat's cutting bread and gasoline prices before an election.

While there are certainly components of the President's proposed tax increases that can be called "fair" (e.g., the increase in the capital gains tax from 15 to 20 percent) and even "overdue" (e.g., the new treatment of most investment fund manager compensation as ordinary income), others are no better than cynical; e.g., sporadic "middle class" tax cuts of a few hundred dollars a pop that can only be described as mid-term election pocket change. Moreover, the budget's inclusion of absurd levels of means-testing for its various tax credits (e.g., allowing the child care tax credit for incomes up to $110,000) makes it clear that Obama is out to punish likely Republican voters (the upper middle class and, apparently, parents providing their own child care) rather than to simply limit tax losses, which would be minimal for extending the tax breaks to all brackets. Finally, notwithstanding the President's hyperbole, the budget has little net benefit for increasing small business employment since the small businesses (LLCs, partnerships and "S" corporations) that employ most workers will see their taxes increase as a result of the higher marginal rates and the diminution of the mortgage interest and charitable deductions.

Overall, the budget deserves a "B-" for its spending priorities but a "D" for its cynical tax policy.

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